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Where do miners sit after the commodity crash? BHP is a miner with a very serious hobby in oil and gas, but it makes its living from iron ore and copper. That hobby has started to look too much of a luxury since the oil price collapsed last year. On Wednesday it announced cuts to its US shale oil effort, only a few years after entering the space. It wants to reduce exposure to the the areas it cannot control. But what of iron ore, BHP's key product accounting for easily half of operating profits? The company doesn't want to harm its most profitable product. But there are signs that the iron ore market could suffer more this year. Bad news for BHP and its rivals.
Join Lex live at midday UK time to discuss.
No one rings a bell on the day that a given market hits the bottom. That is the reason for owning assets that everyone hates: because you want to be hanging around on the day that everyone stops hating them quite so much, and it is impossible to predict when that day is going to be.
This sums up the argument Lex made last week about copper miners. Everything, from the strengthening dollar to the weakening global economy to short sellers, is lined up against them. So maybe a contrarian bet is in order; if so, pick a low-cost producer so you don’t have to worry about solvency at the same time as you worry about the stock price. In that note, we characterized KAZ Minerals of Kazakhstan as a high cost producer. The company begs to differ, and they sent us the following counter-argument:
UK house prices rose 7 per cent last year, according to Nationwide. Shares in housebuilders Persimmon and Barratt are up by over 10 per cent. Nice profits all round, then. Time to get out while the going is good, or double down in the hope that not even higher interest rates will damage the long term growth story? Join us at midday UK time for a live discussion.
Lex is anonymous, but the cover over our identities is threadbare. We’re right there on our biographies page, on this blog, and elsewhere. Why maintain the pretence? After all, it has a cost. It makes recruiting writers harder when “build your personal brand” is the dispiriting advice offered to journalists worried about the instability of news organizations.
But a little anonymity helps Lex maintain an identity (something not to be confused with anything so vulgar as a brand). The identity is partly stylistic: the column aims for analytic heft, brevity, and wit, with occasional success. It also involves perspective. Lex is on the side of the patient investor first, as opposed to, say, traders, managers, employees, the common good, or capitalism at large.